March 4, 2021

Rental Law 2019: as affects tenants and owners – The Province

Rental Law 2019: as affects tenants and owners - The Province

The decree of urgent measures regarding rental, whichlimits the annual increases in prices to the increase in the CPIfor all new contracts during the duration of the signed contract, it will enter into force this Wednesday after its publication this Tuesday in the Official State Gazette (BOE).

With this royal decree, whichextends the extension of the duration of the contract to five years compared to the current three, we return to the situation of 1994 with regard to the consideration of the increase in the CPI to place the increase in the rent of rental housing, although in this case the CPI will not be mandatory as then and will only operate as a roof.

This measure will only be applicable forthe new contracts that are subscribed as of today.The lease contracts subject to the Urban Leasing Law of 1994, executed prior to the entry into force of the new regulation, will continue to be governed by the provisions of the legal regime applicable to them.

However, when the parties agree and it is not contrary to the legal provisions,pre-existing contracts may be adapted to the legal regimeestablished in the new decree.

The regulation includes the elaboration of a state system of indexes of reference to housing, which will be used to monitor the market and serve as a support for fiscal measures.

This benchmark index, for which the Government is working eight months, will be updated annually and will be as detailed as possible.

This state benchmark tool will be compatible with other indices that can be drawn up by the autonomous communities to define the application of their competencies in housing policies. However, this index does not in any case enable administrations to establish systems for regulating rental prices.

Although the draft of the royal decree did pick upa bonus of 80% of the IBI for real estate for renting a habitual residencewhose income was lower than that determined by this price index, the approved norm gives the town councils and communities the possibility of deciding their housing policy according to their fiscal framework.

The norm does contemplate the elimination of the obligation of the tenant to pass on the IBI in the case of social housing, and offers again to the municipalities the possibility of giving housing for rent limited rent by a legal standard a bonus of 95% of the entire IBI fee.

Extension of the mandatory and tacit extension

On the other hand, the royal decree includes the extension of the mandatory extension ofrental contracts from 3 to 5 years (or 7 years if the landlord is a legal entity).

In addition, as a novelty it states that, during this term, the power to recover the home by the owner (natural person) must be "expressly included in the rental agreement".

It also includes the extension of the tacit extension from one to three years and includes as a noveltythe extension of the notice period,which establishes four months for the landlord and two months for the tenant.

Thus, the anticipation is increased with which it must be indicated that they do not wish to continue with the contract once the mandatory extension has been completed.

The decree states that lease contracts must always be respected by third-party buyers of the property, especially in the mandatory extension period of five or seven years.

According to the Government, this measure is necessary to prevent possibleinvestment fund practices that acquire leased housingand that they decide not to assume the terms and conditions of the current contracts.

In addition, the text states that the buyer of the house will have to respect the rental contract whether or not it is registered in the Property Registry.

Similarly,the text establishes an exception to agree on the waiver of subrogation in long-term lease contracts.

Thus, it establishes that in the event of the death of the tenant, in situations of vulnerability, the dwelling leased by the family member with whom he / she was living may be maintained.


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